2016-09-23

China Raising Coal Output to Stem Price Rise

China’s state-owned miners have agreed to increase thermal coal output in an oblique attempt to mitigate a sharp rise in the coking coal price that is punishing the nation’s steel mills.

The price of the coking coal, also known as metallurgical coal, has doubled in the past six weeks, catching the Chinese industry by surprise and offering a rare spot of cheer to producers in Australia and elsewhere.

The rise prompted a protest from the China Iron and Steel Association, which represents large state-owned steel mills.

In an emergency meeting on Friday, the nation’s largest state-owned coal miners agreed to increase output.

That comes after months of production cuts by beleaguered miners as Beijing attempts to rectify extreme overcapacity in the coal industry and permanently shut debt-ridden mines whose deposits have been tapped out.

“We misjudged — we didn’t think the production limits would be so effective,” said Henry Liu, research director at CEBM in Shanghai.